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Organic Delusions: Wal-Mart's Foray into Organics

Like kids in a candy store, Wal-Mart executives may have eyes bigger than their stomachs. Do they really think they can manage a major expansion of organic food sales while driving organic prices down to within 10 per cent of conventional foods?

The strategy now being attempted in U.S. stores and bound to appear soon north of the border may have unintended consequences. By throwing its weight around on the organic block, Wal-Mart may just provoke the politicization of North America's organic food business.

This sector has so far remained aloof from politics and managed to keep the tensions of a decade's exponential expansion both quiet and internal.

Everyday low prices for quality organics would certainly boost sales by organic farmers. But it's not clear that the company can actually accomplish this. Inside-the-box-store thinking may be leading Wal-Mart officials to think they can duplicate successes in other areas without taking into account the unique character of organic food production.

It's all food for Wal-Mart executive afterthought: organic food really is a different beast.

Wal-Mart's classic methods are less likely to succeed in forcing down the prices of organic food than they were in depressing the prices of manufactured goods, including organic milk, which the company already leads the world in selling.

Wal-Mart method 1. Special deep discounts exacted in return for high-volume purchases work for widgets made in factories, where the per unit price goes down with mass production.

But the per unit costs of goods grown on organic farms don't follow a typical factory graph. More of the same organic crop on one farm field doesn't lower per unit labour costs, but usually means more pest problems, since monoculture, the precondition for mass production methods, is a magnet for pets and parasites.

Wal-Mart method 2. Just-in-time logistics slash the costs and risks of storing blue jeans, plastic toys and hard candies. But ripening crops and unpredictable weather aren't always as amenable to a mega-corporation's squeaky-tight schedule as factory owners are, and organic methods are even more vulnerable to nature's whimsical timing than non-organic. Wal-Mart could find itself holding the bag after a cold spell.

Wal-Mart method 3. Cheap retail labour and buildings don't do much harm to dry goods or conventional foods whose additives help them perform like dry goods. But unskilled labour and poorly equipped stores can wreak havoc on goods that follow natural cycles and go bad on retail shelves.

Welcome to the factors that explain why food was one of the last of the economic sectors to be industrialized, although it was one of the first to be commercialized. Industrialized food may be the best thing since sliced bread, but sliced bread wasn't perfected until the late 1920s.

Apart from cookies, jams, white bread and similar sweet nothings, food production and processing weren't mechanized until the 1950s and 60s, centuries after light industries such as clothing, and a half-century after heavy industries like steel and auto.

Organic bookkeeping adds another slew of problems and introduces another set of perpetual conflicts for industrial-scale retailers.

It's true, some of the high cost of organics relates to the sheer economics of big demand and small supply. The lure of mass sales to Wal-Mart and other retailers will certainly encourage large-scale farmers to switch over to organics.

That new production may well swamp the market, as has happened occasionally with milk and a few crops, such as garlic and onions. A few of these over-produced organics are already being sold into pools of conventional food, at regular prices.

But the main reasons for higher organic prices are structural and will stick around for the long term or foment a huge ruckus when Wal-Mart insists on diluting organic methods.

This is a sticking point for customers, especially the kind of customers trained in Wal-Mart-style consumerism.

Relatively high prices for conventional pop, cookies, pastries, frozen french fries, potato chips, ice cream, microwave meals, and similar pseudo-foods are accepted without complaint because that's the price of what's deemed a special treat.

But there's no excuse other than yuppie snobbery for charging extra for plain organic potatoes, carrots, spinach and breads, many non-organic customers complain.

Having long suffered from this double standard on food prices, those who know and respect what organic food is about are pretty defensive about its high prices. In contrast with the artificially low price of synthetic or industrialized food, the relatively high price of organics captures something like the full cost and value of growing and marketing real food that meets environmental and human health needs.

Organic prices "internalize" these costs. By contrast, the low sticker prices seen at Wal-Mart and other superstores come from "externalizing" the full cost of cheap fertilizers and pesticides by dumping them in the environment and on unsuspecting animals, including people.

Wal-Mart, an icon for such externalization practices, is increasingly reviled for the everyday expensive pollution and exploitation linked to its everyday low prices.

But organic producers can't externalize costs without losing their way. They can't dump manure from factory barns into rivers and then buy chemical fertilizers; they have to compost manure and return it to the soil, which is more expensive. They can't grow miles of one crop and spray with chemicals; to discourage pests, they have to grow a wide range of crops, which is more labour-intensive and expensive.

They can't jam produce into a truck, then spray it with fungicides that keep it from spoiling and gases that keep it from looking haggard; post-harvest handling has to be quick, skilled and careful, which costs money.

The only way to mess with organic prices is to mess with organic rules, already under constant pressure in the U.S., where the Department of Agriculture controls the organic label and has allowed standards to erode to the point where factory-style cow and livestock barns are setting the norm.

The same pressures will be applied to a Canadian government label, expected sometime in the next year.

The impact of a cost-cutter like Wal-Mart on government-managed organic standards will cause the organic manure to hit the fan. Wal-Mart execs may be getting more than they bargained for when they try to mesh organic processes with hyper-industrialized retail.